BiteMiner (biteminer.com) went live in February 2016 and provides cloud mining services. It is largely a copy of another recent scam called HashOcean, albeit less refined.The company’s legitimacy has been evaluated based on the items listed below. Every individual item has been checked for the presence of obvious red flags or warning signals. If these are present, an explanation detailing what triggered them has been included. A detailed description of the reasons to evaluate each of the included items can be found below the table.

Persuasion

Total Flags: 15 (3 Warnings = 1 Flag)

Phantom Riches

Advertising "Return on investment within 5 months".

Scarcity

Actively uses limited time offers.

Source Credibility

N/A

Social Proof

Referral program awarding 5 percent commission.

Reciprocity

Trial for 15 KH/s "free and forever".

Products

Guaranteed Return

N/A

High Return / Low Risk

Extremely high returns with an expected ROI of well over 20 percent per month.

Overly Consistent, Positive Returns

Daily profitability is consistently high and does not change in line with the total network hashrate, difficulty, or exchange rate. For the entire history (from June to November 2016) returns are perfectly flat at 0.004 BTC per MH/s.

Downplaying Risk

BiteMiner fails to include any risk disclosure at all.

Hardware Equipment

Public Mining Address

No

Pictures of Mining Equipment

None

Secretive or Complex Equipment

The website mentions BiteMiner mines "Bitcoin and other cryptocurrencies", and shows that 1 MH/s returns 0.004 BTC per day (5-Nov-2016). At the same time, it can easily be established that 1 MH/s is simply unable to produce this amount. 1 MH/s on Scrypt returns 0.00005 BTC per day at best, on Bitcoin itself that would even come down to 0.0000009 BTC per day. BiteMiner is thus mining many times more than what is mathematically possible. BiteMiner does not explain how it does this.

Service

Website Available

Yes

Website Registration Details

Registered February 2016

Website Design

Terms of use not present.

Grammar on Website

Good

Payments Options

Bitcoin only

Service Disruptions & Unbusinesslike Conduct

Missing terms and conditions result in no legal basis for doing business.

Contact Information

Not provided

Business

Verified Address

No address has been provided and website registration details are privacy protected.

Verified Owner

The name of the owner is unknown.

Business Registration

No business registration was found in any of the countries where BiteMiner has a data centre.

Independent Audits

None

Note that items with a warning instead of a flag indicate that these could occur at a legitimate company. For example, legitimate companies will normally try to persuade you into buying their products. Multiple warnings will, however, still trigger a flag. A description for the listed items is provided below. This list is meant to assist with identifying obvious scams, and therefore does not provide any guarantees that a company is truly legitimate.

Phantom Riches The most common tactic used by fraudsters is called “phantom riches”. By dangling the prospect of wealth such as “big payoffs”, the scam artist tries to get you to stop thinking logically.

Scarcity Using the fear of missing out, fraudsters create a false sense of urgency with statements such as “last chance” or “only so few available”. This causes people to agree hastily, before even having the opportunity to think about what they’re doing.

Source Credibility Persuasion is more likely when the source presents itself as being credible, expert and trustworthy. Common tactics used by scammers to make themselves look legitimate include using fake websites or hacked emails and pretending to be someone they are not. Alternatively, sources can also be external with claims such as “Warren Buffet has already invested in this”.

Social Proof Fraudsters take advantage of herd behavior by creating the illusion of consensus or social proof that the investment is legitimate with claims that “everybody is already doing it”, or referral programs in which members encourage their friends and associates to invest as well. This automatically triggers something in the head that says: “if everybody [or someone from the inner circle] wants it, it must be good”.

Reciprocity A business is likely to receive far more of our trust when it provides a lot of free value, because of the rule of reciprocity which causes us to tend to feel obligated to return favors after people do favors for us

Guaranteed Return All investments carry some degree of risk, so a guaranteed profit is a clear red flag. A valid question would be why an organization would try to sell such a scheme instead of using it to get rich themselves.

High Return / Low Risk Like a guaranteed return, a high return / low risk investment opportunity also defies the common risk-return relationship. The best advice is an old one: “if it sounds too good to be true, it probably is”.

Overly Consistent, Positive Returns Cryptocurrency markets are among the most volatile markets, hence the performance of any related product or service is also expected to fluctuate.

Downplaying Risks The fraudster will do anything to provide a false sense of security, such as presenting some form of external risk insurance for the investment. In reality, insurance is only seldom acquired and guarantees typically lack substance. Dummy companies are often used to act as the guarantor or insurer. Other actions may include misrepresenting, or even non-disclosure of risks involved.

Public Mining Address A cloud mining company must have a public cryptocurrency address in order to participate in the mining process. There is no reason for a legitimate company not to disclose this.

Pictures of Mining Equipment Cloud Mining companies should be able to provide some pictures of the products they are selling besides any textual descriptions.

Secretive or Complex Equipment Even in the world of cryptocurrencies one should be skeptical about special competitive advantages without any proper disclosure, or when the information is incomprehensible or incomplete. Too often only the positive elements are accentuated.

Website Available Considering the importance of domains and websites in the internet age, there is almost no reason for a legit company not to have one.

Website Registration Details Very few scam websites survive longer than one year, so domains are generally registered for just one year unless otherwise required for the specific domain. For the same reason, websites created less than one year ago should be considered suspicious.

Website Design Amateurish, cluttered and disorganized websites can point to a scam as many scam sites use text and images from legit websites and other sources which may not work together very well.

Grammar on Website Many scammers have limited English proficiency.

Payments Options Even though cryptocurrency payment options are logical for a cryptocurrency company, it is also very convenient for scammers as the recipient essentially remains anonymous. The same goes for services such as Western Union and Moneygram. Hence a lack of alternative payment options should still be considered a warning signal.

Service Disruptions & Unbusinesslike Conduct Especially Ponzi scheme promotors will encourage participants to “roll over” their investment. These schemes are not very fond of investors cashing out, which may lead to difficulties receiving payments and a non-responsive or difficult to reach customer service.

Contact Information Legitimate companies have very little reason not to list their contact information.

Business Verification First, you should never hand your hard-earned money over without knowing where it is going. Second, you should do a background check to avoid handing it to a known scammer. Be weary of people without an online identity. Scammers will typically try to hide their identity or conceal their true identity to avoid being easily discovered.

Independent Audits Audits certainly do not root out every instance of fraud, but auditors do have a responsibility to detect errors or fraud in the company’s financial statements.